Which of the Following Statements Is Correct

question 30

Multiple Choice

Which of the following statements is correct?

• A) Because we often need to make comparisons among firms that are in different income tax brackets,it is best to calculate the WACC on a before-tax basis.
• B) If a firm has been suffering accounting losses and is expected to continue suffering such losses,and therefore its tax rate is zero,it is possible that its after-tax component cost of preferred stock as used to calculate the WACC will be less than its after-tax component cost of debt.
• C) Due to the way the MCC is constructed,the first break point in the MCC schedule must be associated with using up all available retained earnings and having to issue common stock.
• D) Normally,the cost of external equity raised by issuing new common stock is above the cost of retained earnings.Moreover,the higher the growth rate is relative to the dividend yield,the more the cost of external equity will exceed the cost of retained earnings.
• E) The lower a company's tax rate,the greater the advantage of using debt in terms of lowering its WACC.

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Definitions:

Infant Girls

Female babies from birth to 1 year old, during which time they undergo significant growth and developmental milestones.

Insecure Attachment

A type of emotional bond where an individual experiences anxiety or uncertainty in relationships, often a result of inconsistent caregiving in early life.

Avoiding Caregivers

A behavior observed in some children who show a lack of trust or discomfort with their caregivers, often due to inconsistent or neglectful caregiving.

Excessive Clinging

An overly dependent behavior where an individual shows an extreme need for physical or emotional closeness, indicative of underlying attachment issues.